Russia 100414 Basic Political Developments

Vancouver Sun: Khan Resources says it's targeted by Russians

http://www.vancouversun.com/business/Khan+Resources+says+targeted+Russians/2904338/story.html

 

By Peter Koven, Financial PostApril 13, 2010 9:00 PM

 

Canadian junior miner Khan Resources Inc. is caught in a geopolitical mess involving Russia, China and Mongolia. And even as the situation worsens, the company maintains that a planned Chinese takeover is still in the cards.

But shareholders are not buying it. Khan shares plummeted far below the proposed takeout price Tuesday after the company said its mining licences in Mongolia have been invalidated.

Toronto-based Khan, which controls the Dornod uranium deposit, ran into trouble last year when the Mongolian government suspended one of its licences. The company then received a hostile bid from a state-owned Russian company that it felt was too low.

Khan thought it resolved all those problems when it got the suspension lifted and struck a friendly deal in February to be taken over by China National Nuclear Corp. (CNNC) for $51.8 million in cash, or 96 cents a share.

But according to Martin Quick, Khan's chief executive, Russia has worked behind the scenes to squeeze Khan out, despite the Chinese bid.

"What they are trying to do is get Dornod for nothing," he said.

Russia and Mongolia recently reached an agreement to jointly develop uranium projects in Mongolia, and Quick said Russia has used it to pressure the Mongolia Nuclear Energy Agency (NEA) to force out Khan.

Tuesday, Khan dropped its bombshell announcement that its licences have indeed been pulled, and Quick suspects that the plan is to transfer the mineral rights over to a Russia-Mongolia joint venture.

"It's an absolute travesty, and we're going after the NEA in court now," he said.

Khan shares plummeted more than 30 per cent on the news, and they are now trading at a discount of roughly 40 per cent to CNNC's offer. However, Quick maintained that CNNC accepted all the political risk when it struck the deal and it should still close. The offer is set to expire May 25.

Mongolia has said it wants more mining investment from the West, and it took a big step in that direction last year when it struck an investment agreement with Robert Friedland's Ivanhoe Mines Ltd. to develop the giant Oyu Tolgoi project.

However, the Khan situation threatens to revive the political risk concerns that have held back Western investment in the past.

"It's a sad commentary on what's going on in Mongolia," Quick said.

"They speak out of both sides of their mouth. On one side they're trying to attract foreign capital, and on the other side they're bowing to the pressure of Russian hardball."

© Copyright (c) The Vancouver Sun

Reuters: UPDATE1 – KazakhGold seeks Russia approval for Polyus bid

http://www.lse.co.uk/FinanceNews.asp?shareprice=&ArticleCode=hhuvu8cvv7gy04u&ArticleHeadline=UPDATE_1KazakhGold_seeks_Russia_approval_for_Polyus_bi
Wed, 14th Apr 2010 08:05
LONDON, April 14 (Reuters) - Kazakh gold miner KazakhGold said it had applied for Russian government approval for a planned reverse takeover of its parent firm Polyus Gold , though there was no certainty a deal would go ahead.

'KazakhGold confirms that it has applied for an approval from the government commission on monitoring foreign investment in the Russian Federation for the acquisition of control over Polyus Gold by the company,' KazakhGold said in a statement on Wednesday.

'No decision has been made regarding any possible transaction, and any transaction would remain subject to a number of approvals and pre-conditions, including various corporate and government approvals. Consequently, there can be no certainty that any transaction will be forthcoming.'

The head of Russia's anti-monopoly office on Tuesday said the reverse takeover of Polyus, Russia's top gold producer, which controls KazakhGold, had already been cleared by the Russian government.

Analysts said the move would increase Polyus' stock market liquidity.

Polyus is controlled by two tycoons, Mikhail Prokhorov and Suleiman Kerimov, and has a lower level listing on the London Stock Exchange than KazakhGold, which gives the latter much greater liquidity.

(Reporting by Rhys Jones; Editing by Victoria Bryan) Keywords: RUSSIA POLYUS/KAZAKHGOLD

([e-mail], [phone], Reuters Messaging: [e-mail])

Bloomberg: KazakhGold Says It’s Mulling Polyus Reverse Takeover (Update1)

http://www.businessweek.com/news/2010-04-14/kazakhgold-says-it-s-mulling-polyus-reverse-takeover-update1-.html
April 14, 2010, 3:42 AM EDT

(Adds analyst comment in fourth paragraph.)

By Maria Kolesnikova

April 14 (Bloomberg) -- KazakhGold Group Ltd., controlled by Russia’s largest producer of the metal OAO Polyus Gold, said it’s considering the acquisition of its parent company in a reverse takeover.

“Consideration of a possible transaction remains at a preliminary stage,” Jersey-registered KazakhGold said in a statement today.

KazakhGold would be renamed Polyus Gold and the company could join the U.K.’s FTSE 100 Index, Vedomosti reported in November. The takeover would allow Polyus to bypass a Russian law capping at 25 percent the shares of a company that can be held as depositary receipts, giving it access to a bigger group of investors.

“The new international Polyus Gold should gain easier access to international capital and be able to acquire assets internationally more easily,” UralSib Financial Corp. analysts led by Michael Kavanagh wrote in a note to investors. Share liquidity will also improve, the analysts said.

Kazakhgold, which is 50.1 percent owned by Polyus, received Russian antitrust approval yesterday to buy the Russian company’s key production and exploration units. KazakhGold is likely to issue new shares to Polyus for the assets, diluting minority investors’ stake to 2 percent from 49.9 percent, UralSib said.

--Editors: Simon Casey, Tony Barrett

Maria Kolesnikova in Moscow at [phone] or [e-mail]

To contact the editor responsible for this story: Stuart Wallace at [e-mail]